MetLife 2012 Annual Report Download - page 204

MetLife, Inc.
Notes to the Consolidated Financial Statements — (Continued)
settlements reached in 2006 and prior years. In 2005, MLIC received 18,500 new claims, ending the year with a total of 100,250 claims, and paid
$74.3 million for settlements reached in 2005 and prior years. In 2004, MLIC received 23,900 new claims, ending the year with a total of 108,000
claims, and paid $85.5 million for settlements reached in 2004 and prior years. In 2003, MLIC received 58,750 new claims, ending the year with a total
of 111,700 claims, and paid $84.2 million for settlements reached in 2003 and prior years. The number of asbestos cases that may be brought, the
aggregate amount of any liability that MLIC may incur, and the total amount paid in settlements in any given year are uncertain and may vary significantly
from year to year.
The ability of MLIC to estimate its ultimate asbestos exposure is subject to considerable uncertainty, and the conditions impacting its liability canbe
dynamic and subject to change. The availability of reliable data is limited and it is difficult to predict the numerous variables that can affect liability
estimates, including the number of future claims, the cost to resolve claims, the disease mix and severity of disease in pending and future claims, the
impact of the number of new claims filed in a particular jurisdiction and variations in the law in the jurisdictions in which claims are filed, the possible
impact of tort reform efforts, the willingness of courts to allow plaintiffs to pursue claims against MLIC when exposure to asbestos took place after the
dangers of asbestos exposure were well known, and the impact of any possible future adverse verdicts and their amounts.
The ability to make estimates regarding ultimate asbestos exposure declines significantly as the estimates relate to years further in the future. In the
Company’s judgment, there is a future point after which losses cease to be probable and reasonably estimable. It is reasonably possible that the
Company’s total exposure to asbestos claims may be materially greater than the asbestos liability currently accrued and that future charges to income
may be necessary. While the potential future charges could be material in the particular quarterly or annual periods in which they are recorded, based on
information currently known by management, management does not believe any such charges are likely to have a material effect on the Company’s
financial position.
The Company believes adequate provision has been made in its consolidated financial statements for all probable and reasonably estimable losses
for asbestos-related claims. MLIC’s recorded asbestos liability is based on its estimation of the following elements, as informed by the facts presently
known to it, its understanding of current law and its past experiences: (i) the probable and reasonably estimable liability for asbestos claims already
asserted against MLIC, including claims settled but not yet paid; (ii) the probable and reasonably estimable liability for asbestos claims not yet asserted
against MLIC, but which MLIC believes are reasonably probable of assertion; and (iii) the legal defense costs associated with the foregoing claims.
Significant assumptions underlying MLIC’s analysis of the adequacy of its recorded liability with respect to asbestos litigation include: (i) the number of
future claims; (ii) the cost to resolve claims; and (iii) the cost to defend claims.
MLIC reevaluates on a quarterly and annual basis its exposure from asbestos litigation, including studying its claims experience, reviewing external
literature regarding asbestos claims experience in the United States, assessing relevant trends impacting asbestos liability and considering numerous
variables that can affect its asbestos liability exposure on an overall or per claim basis. These variables include bankruptcies of other companies involved
in asbestos litigation, legislative and judicial developments, the number of pending claims involving serious disease, the number of new claims filed
against it and other defendants and the jurisdictions in which claims are pending. As previously disclosed, in 2002 MLIC increased its recorded liability
for asbestos-related claims by $402 million from $820 million to $1.2 billion. Based upon its regular reevaluation of its exposure from asbestos litigation,
MLIC has updated its liability analysis for asbestos-related claims through December 31, 2012.
Regulatory Matters
The Company receives and responds to subpoenas or other inquiries from state regulators, including state insurance commissioners; state attorneys
general or other state governmental authorities; federal regulators, including the U.S. Securities and Exchange Commission (“SEC”); federal
governmental authorities, including congressional committees; and the Financial Industry Regulatory Authority (“FINRA”) seeking a broad range of
information. The issues involved in information requests and regulatory matters vary widely. The Company cooperates in these inquiries.
MetLife Bank Mortgage Regulatory and Law Enforcement Authorities’ Inquiries
Since 2008, MetLife, through its affiliate, MetLife Bank, has been engaged in the forward and reverse residential mortgage origination and servicing
business. See Note 3 for information regarding the MetLife Bank Divestiture. State and federal regulatory and law enforcement authorities have initiated
various inquiries, investigations or examination of alleged irregularities in the foreclosure practices of the residential mortgage servicing industry.
Mortgage servicing practices have also been the subject of Congressional attention. Authorities have publicly stated that the scope of the investigations
extends beyond foreclosure documentation practices to include mortgage loan modification and loss mitigation practices.
On April 13, 2011, the Office of the Comptroller of the Currency (the “OCC”) entered into consent orders with several banks, including MetLife Bank.
The consent orders require an independent review of foreclosure practices and set forth new residential mortgage servicing standards, including a
requirement for a designated point of contact for a borrower during the loss mitigation process. In the first quarter of 2013, MetLife Bank entered intoan
agreement in principle with the OCC to settle obligations related to the independent foreclosure review required by its consent order. Under the
agreement in principle, the foreclosure review will end and MetLife Bank will pay approximately $46 million. In addition, the Federal Reserve Board
entered into consent decrees with the affiliated bank holding companies of these banks, including MetLife, Inc., to enhance the supervision of the
mortgage servicing activities of their banking subsidiaries. On August 6, 2012, the Federal Reserve Board issued an Order of Assessment of a Civil
Monetary Penalty Issued Upon Consent against MetLife, Inc. that will impose a penalty of up to $3.2 million for the alleged deficiencies in oversight of
MetLife Bank’s servicing of residential mortgage loans and processing foreclosures that were the subject of the 2011 consent order.
MetLife Bank has also had a meeting with the Department of Justice regarding mortgage servicing and foreclosure practices. It is possible that various
state or federal regulatory and law enforcement authorities may seek monetary penalties from MetLife Bank relating to foreclosure practices.
MetLife Bank has also responded to a subpoena issued by the New York State Department of Financial Services (“Department of Financial Services”)
regarding hazard insurance and flood insurance that MetLife Bank obtains to protect the lienholder’s interest when the borrower’s insurance has lapsed.
In April and May 2012, MetLife Bank received two subpoenas issued by the Office of Inspector General for the U.S. Department of Housing and Urban
Development regarding Federal Housing Administration (“FHA”) insured loans. In June and September 2012, MetLife Bank received two Civil
Investigative Demands that the U.S. Department of Justice issued as part of a False Claims Act investigation of allegations that MetLife Bank had
improperly originated and/or underwritten loans insured by the FHA.
The consent decrees, as well as the inquiries or investigations referred to above, could adversely affect MetLife’s reputation or result in significant
fines, penalties, equitable remedies or other enforcement actions, and result in significant legal costs in responding to governmental investigations or
198 MetLife, Inc.